Bandalan v. CIT Bank N.A. et al

Filing 12

INCLINATIONS by JUDGE SUSAN OKI MOLLWAY. (afc)CERTIFICATE OF SERVICE Participants registered to receive electronic notifications received this document electronically at the e-mail address listed on the Notice of Electronic Filing (NEF). Participants not registered to receive electronic notifications will be served by first class mail on the date of this docket entry.

INCLINATIONS
It is Judge Mollway’s practice, whenever possible, to
notify attorneys and pro se parties scheduled to argue motions
before her of her inclinations on the motions and the reasons for
the inclinations. This is part of Judge Mollway’s normal
practice, rather than a procedure unique to a particular case,
and is designed to help the advocates prepare for oral argument.
It is the judge’s hope that the advance notice of her inclination
and the accompanying reasons will focus the oral argument and
permit the advocates to use the hearing to show the judge why she
is mistaken or why she is correct. The judge is not bound by the
inclination and sometimes departs from the inclination in light
of oral argument.
Judge Mollway attempts to communicate her inclinations
no later than one working day before a hearing. The court’s
preference is to distribute the inclinations to the parties via
the court’s electronic filing system (“CM/ECF”). Accordingly,
parties are encouraged to participate in the court’s CM/ECF
system.
The inclination is intended to be only a summary of the
court’s thinking before the hearing and not a complete legal
discussion. The court will issue a written order with a detailed
analysis after the hearing.
The parties are reminded that, under Local Rule 7.4,
they may not submit supplemental briefs (such as briefs
addressing the inclination) unless authorized by the court.
Supplemental declarations, affidavits, and/or other evidence in
response to the court’s inclinations are prohibited unless
authorized by the court. The parties are also reminded that they
must comply with Local Rule 7.8 if they intend to rely on uncited
authorities at the hearing.
Occasionally, Judge Mollway does not announce an
inclination, especially if materials are submitted to her right
before the hearing. Because briefing on criminal motions closes
just a few days before the hearing, it is not uncommon for her to
be unable to announce an inclination on a criminal motion until
the start of the hearing itself. Certainly if an evidentiary
hearing is scheduled on matters necessary to a decision on either
a civil or criminal motion, no inclination will be announced.
Judge Mollway’s inclinations may not be cited as
authority for any proposition. However, the inclinations will be
electronically filed for the convenience of the parties.
Judge Mollway announces the following inclinations:

Bandalan v. CIT Bank, N.A., Civ. No. 17-00245 SOM/RLP
This case is almost identical to Hall v. CIT Bank, Civ.
No. 17-00224 SOM/KJM.

However the court rules, it is likely that

the same reasoning will apply to both cases.
The court asks the parties to come to the hearing
prepared to address the following:
1.

Assuming the Corres are good faith purchasers for value
with respect to the sale of the property to them,
should they be parties to this action, which seeks the
return of title to the property that the Corres’
purchased?

It appears that adding them to the case

would destroy diversity.
2.

What do the parties suggest?

The issues raised in the present motion are also raised
in at least three other cases in this court that have
been removed from state court: Capili v. CIT Bank N.A.,
Civ. No. 17-00243 HG/KJM; Hall v. CIT Bank, Civ. No.
17-00224 SOM/KJM; and Hishinuma v. HSBC Bank USA, N.A.,
Civ. No. 17-00219 HG/KJM.

What is the status of other

cases that have not been removed but involve the same
issues?
a.

Has a Hawaii circuit court ruled on whether a Land
Court certificate of title has or lacks conclusive
and unimpeachable effect under analogous
circumstances?

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b.

Has any court ruled on whether the failure to
conduct a nonjudicial foreclosure sale in
conformance with either a power of sale clause or
a nonjudicial foreclosure statute renders the sale
void or is a “constructive fraud” that allows
title to be challenged, notwithstanding a
certificate of title?

c.

Is any appeal pending that is likely to address
2(a) or 2(b)?

If yes, at what stage is that

appeal?
3.

The Hawaii Supreme Court has stated that “conclusive
effect is to be given the certificate of title on the
question of title to land.”

Aames Funding Corp. v.

Mores, 107 Haw. 95, 101, 110 P.3d 1042, 1048 (2005).
“[A] mortgagor’s right to impeach a foreclosure
proceeding is expressly limited to the period before
entry of a new certificate of title.”

Id.

The

Bandalans contend that their lender’s failure to adhere
to the terms of the power of sale amounts to a
constructive fraud that allows title to be challenged
notwithstanding any Land Court certificate of title.
See In re Bishop Trust Co., 35 Haw. 816, 825, 1941 WL
7950, at *5 (1941) (recognizing fraud as exception to
conclusiveness of Land Court certificate of title).

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Citing Ulrich v. Security Investment Company, 35 Haw.
158, 171, 1939 WL 8155 (Haw. Terr. 1939), the Bandalans
say that, in selling property through Hawaii’s
nonjudicial foreclosure process, a lender is tantamount
to a trustee and is a fiduciary.
Based on Ulrich, the lenders argue that “all of
the incidents” of a trustee-beneficiary relationship do
not exist when a lender sells a borrower’s property
under a power of sale.

Id., 35 Haw. at 171, 1939 WL

8155, at *7.
The Bandalans counter that “[a] sale under a power
must be fair and bona fide to have the effect of
extinguishing the equity of redemption.

The mortgagee

has no right, by any unfairness, to sacrifice the
property, and deprive the mortgagor of a surplus over
the debt which might arise from a sale properly
conducted; or make him liable for a deficiency greater
than there would be under a sale fairly conducted.”
Id.

The Bandalans also argue that a lender’s failure

to comply with the power of sale provisions renders the
sale void such that they may challenge title
notwithstanding the Land Court certificate of title.
The issue is therefore whether and under what
circumstances a lender’s alleged failure to comply with

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a power of sale or a statute governing the exercise of
that power of sale, chapter 667, part I, of Hawaii
Revised Statutes, amounts to “constructive fraud” or
makes the sale void.
a.

The court is inclined to note that it may certify
a question to the Hawaii Supreme Court when: (a)
there is a question concerning Hawaii law; (b) the
question is determinative of the cause; and
(c) there is no clear controlling precedent in
Hawaii judicial decisions.

See DeRosa v.

Association of Apartment Owners of the Golf
Villas, 2016 WL 3951061, at *2 (D. Haw., July 20,
2016); Haw. R. App. P. 13(a).

The parties are

asked to come to the hearing prepared to discuss
whether the issue should be certified to the
Hawaii Supreme Court.
b.

If the court were to certify the issue, the
parties should come to the hearing prepared to
discuss what question(s) should be certified.

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